Foster Farms battles insurers over definition of 'recall'

Wed Jul 9, 2014 3:31pm EDT
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By P.J. Huffstutter

CHICAGO (Reuters) - Foster Farms and its London insurers are facing off over the definition of "product recall" as the poultry producer seeks payment of $14.2 million in claims arising from a government-mandated shutdown of one of its plants, court documents show.

The company sued a group of Lloyd's of London [LOL.UL] underwriters in June, arguing the closure and resulting product losses constituted a recall under the terms of its insurance policy.

Foster Farms, one of the largest chicken producers in the United States, filed an amended complaint last Thursday in U.S. district court in Fresno, California, saying three insurance underwriters at Lloyd's acted improperly when they rejected its claims for the production stoppages in January.

The insurers said the Foster Farms policy covered economic losses when the company called back its products from customers, not when the company destroyed products that it had not yet shipped to customers, documents in the case show.

But Foster Farms argues that the insurers are inaccurately basing their decision on an ambiguous and "exceedingly narrow definition of the word 'recall'," according to the complaint.

The claims are against XL Syndicate, Ark Syndicate and Syndicate 1206, jointly referred to as "the London insurers," according to the complaint.

The three underwriters operate on the 326-year-old Lloyd's of London insurance market, a collection of about 90 competing insurers housed in a landmark building in the heart of London's financial district.

"We don't confirm or comment on clients or claims," XL Insurance said in a statement. Lloyd's of London and the other two underwriters could not be reached for comment.   Continued...

A package of Foster Farms fresh chicken fillets is pictured in this photograph taken in Burbank, California in this file photo from October 11, 2013. REUTERS/Fred Prouser/Files